After more than 20 years in self-storage manufacturing, Terry Campbell left to bring a different product to the industry — Small Business Administration (SBA) loans.

In March, Campbell joined Wilmington, NC-based Live Oak Bank, a preferred SBA lender for several niche industries. Campbell was tapped to lead the bank’s new self-storage division. Before his new role, Campbell directed sales and marketing at a self-storage building manufacturer.

SBA loans weren’t available to the self-storage industry until five years ago, and Campbell said they’ve been underused because many banks aren’t knowledgeable about self-storage. The SpareFoot Storage Beat spoke with Campbell to learn more about self-storage SBA loans.

Why have SBA loans been slow to take off in the self-storage industry?

Self-storage did not have availability in the SBA program until the fall of 2010. A lot of people needed financing, but nobody could get it back then. Even the guys who had been in the business for a long time couldn’t get loans.

People started hearing about SBA and how to get self-storage loans, and banks started to say, “Let’s see if we can do them.” The banks offered them, but not all banks knew what they were doing.

How does Live Oak speed up the process?

With us, the loans stay in-house. We are a preferred lender, so we approve the loans. Live Oak had to have someone familiar with the industry — that’s why they hired me. They build a team around the person and then go after that market. All I do is self-storage, and I understand what the borrower needs.

We know what to look for in a deal, what the competition is like, what occupancy is all about and what the different types of buildings are. There are a lot of things we know to look for that for other banks, it would never enter their mind.

Terry Campbell
Terry Campbell of Live Oak Bank says at least half of his loans are for self-storage construction.

What type of borrower is a good for an SBA loan?

Your big boys, the REITs and big chains — they don’t need us. Just about anybody else who wants to build, buy or refinance a self-storage facility is a good fit for SBA loans.

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How big is your pipeline for loans?

When I first started, they told me not to expect to make any loans in the first six months. I’ve been here for three and half months, and I’ve fully closed one and have two more that are approved. There are 12 in the hopper that have a very good shot of happening.

How does your pipeline breakdown by construction, acquisition and refinance loans?

I’d say 50 to 60 percent are for new construction. About 20 to 25 percent are acquisitions, and the rest are refinancing.

What is the typical size of an SBA self-storage loan?

I’ve got one that is a $375,000 refinance loan and one that is $9.5 million for new construction. I’m dealing with everything in between. There are two SBA loan programs, the 7(a) loan and the 504 loan. Most everything that is $5 million or less is 7(a), and everything over $5 million is the 504 loan.

Live Oak Bank
Live Oak Bank, whose headquarters is in Wilmington, NC, launched its self-storage division in March.

Are there other differences between those loans?

The 7(a) is probably more popular, especially for guys starting up or smaller guys. They can get working capital and interest reserves in the loan; you can’t get working capital in a 504 loan. The 504 loan is a 20-year term, and the 7(a) is a 25-year term.

What about newcomers to the industry who don’t have any experience?

If they don’t have experience, they could use a franchise or third-party management partner. About half of my clients so far have never been in the business.

Why do you think people are looking to get into the industry now?

A lot of people have looked at if for years. They see it as a good business, but they have waited. Now, the population is growing and there is more pent-up demand. Another big thing is the money is available. That is probably the number one thing.

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Alexander Harris